Our monthly sentiment run is a behavioral, market-based gauge of investor sentiment in the Materials Sector. Any relative performance measure is tied to the benchmark S&P 500 Materials Sector INDEX (GICS). Further screening methodologies are included in the link to the deck below.
CLICK HERE to access the March Sector Sentiment Run presentation.
- Looking at short-interest, 7 of the top 12 least shorted names are in the Gold Mining & Chemicals space with large-cap Diversified Metals and Miners being the most heavily shorted (FCX, AA, TCK, AWC, FMG). Gold Miners are the least heavily shorted sub-sector
- 8 of the top 12 with the lowest buy ratings are in the Metals & Mining space, with 5 of the 8 being Gold Miners
- Combining consensus “buy” ratings and short-interest, Diversified Chemicals, Specialty Chemicals, and Forest Product names have the most positive relative sentiment when combining both metrics. Diversified Metals and Mining, Aluminum, & Commodity Chemicals have the most negative sentiment.
- With the outperformance in precious metals YTD, relative outperformance, declines in volatility premiums, and net futures and options positioning all suggest the market views Gold Miners much more favorably vs. the beginning of 2016. Looking at the gold market, contract positioning has gone from a consensus net short futures and options position moving into 2016, to a consensus long position in gold (TTM and 3 year z-scores are tracking +2.4 and +2.4 respectively) with futures open interest up 22.4% month-over-month. With the lack of hedging and existence of leverage in the space, each tick in the gold price is leverage won or lost. In the case of the more leveraged names (Barrick, Newmont), a long position is a highly correlated way to be leveraged long of the gold price. This highly correlated leverage to the price of gold likely explains the lack of short-interest in the space.
- The largest sector divergences in growth metrics (TOP-LINE, OPERATING, BOTTOM LINE) exist in the mining space. We expect a downward revision in sell-side estimates in the space as many mining company expectations still need to be taken down while some are already discounted.